Ukraine wants to use CBDCs for retail payments, cross-border transactions and cryptocurrency trading

Source: AdobeStock / Valentin Kundeus

That National Bank of Ukraine (NBU) presented the outline of its plan for its central bank digital currency (CBDC) on Monday. The statement states that the main purpose of the e-hryvnia is to perform all monetary functions by supplementing monetary and non-monetary forms of the hryvnia.

During the discussion with representatives of banks, non-bank financial institutions and the virtual asset market, the central bank presented possible options for the design of e-hryvnia, its architecture, functions and benefits for investors, payment service providers, the statement said.

Possible ways to use CBDC, which is currently under review and development, are:

  • Non-monetary retail payments through money programming functionality, for the implementation of social payments, reduction of public expenses for administration and control of the use of funds and the use of smart contract technology for programming calculation logic based on circumstances and facts;
  • Use in areas related to virtual assets, which include exchanges and issuance schemes;
  • Cross-border payments, which would then be faster, cheaper and more transparent.

With particular regard to crypto-assets, the bank claimed that

E-hryvnia has the potential to become one of the key elements in the development of a qualitative infrastructure for the virtual asset market in Ukraine.

The bank also stated that

“the use of a technological platform for instant payments in e-hryvnia, programming of services and analysis of data flows will create many opportunities for the emergence of new business models, digitization of services, attracting new customers, optimization of costs, etc..”

The next phases

The project was launched last September with the aim of determining the feasibility of large-scale issuance of a digital hryvnia in the country. When creating the concept, the regulator relied on its own research and the results of a survey conducted in 2021 among financial market experts, as well as experience from other countries.

Danmarks Nationalbank’s deputy chairman, Oleksiy Shabanreportedly said that the development and implementation of this CBDC could be “the next step in the development of Ukraine’s payment infrastructure”, while contributing to:

  • the digitization of the economy,
  • further expansion of cashless payments,
  • cost reduction,
  • increase the level of transparency,
  • increased confidence in the national currency in general.

Shaban said all this could have a positive effect on the country’s economic security and monetary sovereignty, as well as the central bank’s ability to maintain price stability and financial stability as a guarantee of sustainable economic growth.

According to the bank,

“The use of e-hryvnia should be convenient and accessible to all sections of the population, legal entities, government bodies, banks and non-bank financial institutions.”

The bank will continue to develop the project with players in the payment market, those in the virtual asset market and government bodies, she concludes.

For its part, India is also continuing its CBDC efforts. The country will launch the first pilot for the digital retail currency on December 1, the country’s central bank said on Tuesday. Four local banks – State Bank of India, ICICI Bank, Yes Bank and IDFC – will participate in the initial phase of the pilot project in four cities: Mumbai, New Delhi, Bengaluru and Bhubaneswar. That Bank of BarodaI’Union Bank of Indiathat HDFC Bank and Kotak Mahindra Bank joins the pilot project thereafter.

In Japan, the central bank could start the digital yen pilot project as early as spring 2023, with a trial involving “consumers and businesses in the private sector.”

Finally, Mainland China and Hong Kong are expected to jointly launch the first cross-border digital yuan pilot project, while the project led by People’s Bank of China (PBoC) is approaching its launch.

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